Rooftop solar power and regulatory issues

Originally posted in The Financial Express on 31 December 2021

Bangladesh in the 26th session of conferences of parties (COP) of United Nations Framework Convention on Climate Change (UNFCC) announced its commitment for more sustainable energy mix and hoped for 40 per cent of energy from renewable sources by 2041. Hon’ble Prime Minister in her speech also mentioned that 10 coal-based power plants worth of 12 billion dollars of foreign investment has been cancelled. Mujib Climate Prosperity Plan (MCPP) will be implemented for a journey from climate vulnerability to climate resilience and then to climate prosperity. In the MCCP theme-4, it is mentioned that the country will pursue for global green investment fund for domestic green energy development.

We have Nationally Determined Contributions (NDC) target by 2030 to go for 4100 MW from Renewable Energy (RE). Increasing the utilisation of RE is one of the targets of SDG-7 declared by the UN. According to the RE policy of Bangladesh, the target was to generate 10 per cent of total electricity i.e., 2000MW from RE by 2020, but we are much behind.

Considering the use of land for solar power (3 acres of land required to produce 1 MW of electricity from Solar energy), it is difficult to go for many large-scale solar power plants. Alternatively, installing solar system on the available roof top of various grid connected buildings such as residents, industries etc are considered important. Presently, we have 45 per cent gas based power, 24 per cent HFO (heavy fuel oil), 7.0 per cent coal, 5.0 per cent imported, and only 3.0 per cent renewable. We have some captive power, and some portion of HSD (high speed diesel). Renewable energy (RE) in total produces 776 MW, which include solar (533 MW), Wind (219 MW), Hydro (230 MW) and others such as Biogas (0.69 MW), Biomass Electricity (0.40 MW).

With regard to rooftop solar as of Sept 2021, the number of Net Metered connection reached close to 1500 with an aggregate capacity of 34 MW, which is a good sign, but it can be improved further and for regulatory constraints needs to be addressed. BUILD (Business Initiative Leading Development) organised a dialogue recently inviting concerned companies using solar power and is willing to expand, support services as developers to understand the regulatory barriers they are facing at the moment.

Companies and solar power developer raised a number of issues which included finance, technology know how, policies, tax, certification, cost of raw materials etc. A big amount of finance is required and technology transfer issues are important. Banks are reluctant and are not fully aware of the importance of the need for green financing for the projects. A big amount of security money is required. Additionally, those who have factories in EPZ have solar plant since last several years, but they are not getting the net-metering (NEM) facility. EPZ authority is not providing proper response after repeated requests for net-metering, as according to them, it is not under their purview.

Import duty of solar panel is zero, duties on inverter (HS 85044090) were raised by 37 per cent in the budget of 2021-22, which has emerged as a serious difficulty. This type of sudden increase causes serious disruption and discourages entrepreneurs to be enthusiastic in this respect.

For duty exemption, NBR advises to collect licence from Bangladesh Energy Regulatory Commission (BERC) as an electricity producer which is time consuming. Some developers are willing to use a model named ‘capital least financing’ for the lower cost of industry, which is in between CAPEX and OPEX model. When they go to BERC for licence under the ‘least financing model’, they consider the project developer as the industry owner, and raise the question– why a developer will be provided with a licence. If developers do not get licence, they cannot take tax rebate.

In all cases imported panels are sent to BSTI for certification; it takes time to clear the consignment causing financial loss of the concerns. Solar panel and inverter certification is an important issue for testing and after completion of testing of BSTI, the importer will be able to clear it from the port. Though there are opportunities to clear by submitting bank guarantee, it is a complex system. Without independent and smooth testing facilities, it would be very risky for the developers.

The net metering guideline 2018 refers to a policy mechanism that allows prosumers (the consumer who consumes and produces electric energy) to connect their renewable energy systems to the distribution grid. Thus a prosumer can supply excess electricity to the distribution grid after self-consumption. In the Net Metering (NEM) Guideline, as per para 3.3 (ii) the output Alternating Current (AC) capacity of the RE converter can be maximum 70 per cent in respect of consumer’s sanctioned loan; on the other hand, 70 per cent on the customer’s sanctioned load is specified as the maximum permissible generator size. Many factories have large size roof capable of producing more than the sanctioned load. Thus if the factory owners were eligible to get incentive for the extra electricity they could produce, they would be more interested in installing solar panels.

As per NEM System Check list (Annex-III), point (d), PV main cable /Power line would need to be DC (manufacturer, Type and cross-section), inverter supply cable/power line would be AC. In Bangladesh nobody produces required type of cables, so there is the need to provide fiscal incentive.

In the NEM guideline under point No (C) on mounting, there is a mention of commitment that all relevant requirements pertaining to building authority regulations, building rules lists and technical building specifications, including BNBC have been met. In case of Reinforced Cement Concrete (RCC)-panel occupying space (around 25-30 per cent of the roof) has to remain vacant. Free space needs to be justified. In most of the cases, for safety concern, 40-60 per cent of the space is to be kept vacant. Roof space and building structures are very important for setting up rooftop solar plant. In most of cases, EPC developers keep a huge roof space vacant to remain in the safe zone from which a factory may produce 20 per cent more electricity.

Tax related issues are a major concern. If the government wants to encourage green energy, there is a need to provide tax incentives, in the form of a CIT reduction so that entrepreneurs are encouraged to initiate RTE.

With the supporting finance and policies, some good examples can be set. In the Export Processing Zone, Youngone is an example, they are outside of the coverage of NEM, however, in case of private EZ, they by themselves established connection with BPDP and has achieved success. Orion has recently established a solar park in Mongla for supplying 134.3 MW peak (solar power measuring unit) of electricity to the national grid. The plant has been established on a 350-acre site that had originally been developed for coal power. It is a $196 million green power project. PDB will purchase electricity from this solar plant for 20 years under a “no electricity, no payment” term. The green project will contribute to reducing around 180,000 tonnes of CO2 emission a year.

Another good example is green power for clean water rooftop water treatment plant in Sarankhola, Bagerhat with solar desalination systems that harvest solar energy to purify water. But there is a concern over maintenance after the end of project cycle. Who will take over the maintenance issue is a big question. Like other RE users there is a cost related issue, especially import cost of parts of the plant. Earlier there was single code for import of all parts, but the situation has changed.

If favourable import conditions are available, more and more solar plants will come up. A number of linkage industries for producing panels, Carocell panels, and cables can also be established. Objectives of the government in relation to climate-friendly clean energy can be achieved by enhancing the capabilities of public-private financial sector, intellectual inputs and technical support.